combination, such as the extraordinary demand during the last 2 or 3 years for iron products, and in other cases, as, for example, the coal combination, it is probable that prices have been kept even lower than they would have been under free competition. The special examples will show for themselves.

The brush manufacturers, regarding whose corporation notice has already been given, handle something over 75 per cent of all the good qualities made in Germany, and in some special styles of brushes their monopoly is complete. There has been some competition from the beginning of the organization; there has been more lately; but, on the whole, their profits have been decidedly improved. They have been able to a considerable extent, as they acknowledge, to keep up prices. The course for several years of a few of their leading styles is as follows:

The first rows of prices are those previous to the formation of the company; V. P.=Vereinigte Pinselfabriken; the second number in connection with V. P. means the present number, while the old numbers, viz, 143F E. H. E., 232 G. C. B., and 84 G. G., are also mentioned.

1377 V. P. A large heavy paint brush, iron ferrule.

232 1335

Small, fine bristle, nickel ferrule.
Large, fine bristle, iron ferrule.

Quite a material increase will be noticed since the year 1890. The dividends of the combination for several years, together with the value of their stock, shows a corresponding increase. For example, from 1894 to 1898 their stock was quoted in Berlin as follows: 1894, 130.30; 1895, 140; 1896, 157; 1897, 167.30; 1898, 164.60; their dividends from 1889 to 1899 were as follows: 71, 81, 6, 61, 8, 9, 10, 10, 10, and 11 per cent.

The combination of lava gas-burners, composed of 5 separate establishments, has control of all the raw material, as well as some of the patents, thus giving them a complete monopoly in certain lines. If this combination were in the form of a corporation, its power would be absolute. As it is, instead of being really a single corporation, it consists of several agreements among themselves, which have been made at different times and along different lines. In some instances they divide sales; for example, 2 of the the companies have agreed that they will sell the same quantity in the United States. One company agrees to send none of its products into France, and so on. The agreements have resulted in a decided increase in prices and a corresponding increase in profits. On the whole, they say, however, they have attempted to keep their prices steady. They claim that they have been forced to raise their prices owing to increased expenses of material, of wages, etc., but they add, at the time of latest information in the fall of 1900, that they expect soon to raise the price again. The course of prices for the last few years is as follows: For lava tips, No. 113-the principal kind-1894-95, 1.15 marks per gross; 1896-97, the same; 1897-98, 1.25; 1898-1900, 1.40, with, as was stated, an increase to follow.

The members of this combination feel confident that their contracts are enforceable. They agreed upon a penalty for their violation and would expect the courts

to enforce its payment. Provided the penalty should be placed too unreasonably high, far beyond the possibility of injury from violation of the contract, it might be that the courts would enforce only a reasonable penalty. In certain cases they have deposited securities, signed acceptances, for forfeit.

The ultramarine manufacturers, a corporation to which attention has already been called, has had its chief gain from its control of prices. Before the combination was made, prices went steadily down. Since then prices have been fairly stable, with a tendency upward.

We have already seen from the study of the way in which the spirits combination was put together that its power over prices is very complete. The purpose, however, of that combination, it was claimed, was not to increase prices, but to hold them moderate and to make an effort to increase as widely as possible the consumption, thus to secure the main profits through extension of the business and security of sale against unreasonable competition rather than through any actual increase in price.

From the form of organization of the sugar combination, as that was explained, it will be seen that there was a deliberate intention of securing to the raw-sugar manufacturers a steady adequate return for their investment by a bounty paid by the refiners, which would, under ordinary circumstances, compel the refiners to insist upon inland prices considerably above competitive rates. Of course export prices would be determined by the world market, and if the world market price should go either very low or very high, that fact would also take the fixing of the prices for the inland consumers out of the hands of the combination. Under what might be considered normal conditions, however, it is fair to say that the inland sugar price for both refined and raw sugar has been placed considerably higher than it would be under competitive conditions, and that this, with of course the intention of keeping prices steady, has been a matter of deliberate purpose.

The managers of the other two or three most important combinations, the several iron combinations, and the coal combinations state that it has been their purpose to keep prices steady, to insure a moderate profit to the investors, and particularly to keep their works steadily employed, so that the wage-earners will be sure of fair and steady wages. During the period of the extraordinary demand for iron products of the last two or three years there has been, to be sure, a considerable increase in prices. The consumers, and even for that matter the managers of some of the other larger combinations, have not hesitated to say that they thought that the iron combinations were fixing prices so high that they were securing rather abnormal profits; that the prices were to a considerable extent monopolistic and hardly justified by the conditions of the business. On the other hand, the managers of the combinations have stated that the increase in price has been due chiefly, as has been claimed in the United States, to the extraordinary demand. They say that they might have increased prices in special cases far more than they have done, and that, on the whole, they have rather checked the speculative increase in price which might be expected from the conditions of the last two years.

It is probable that there has been far more discussion regarding the influence of the coal syndicate upon prices than concerning the influence of any other combination. Coal being a material used almost universally in the production of other lines of goods, of course affects all other industries, and in consequence its price has a very wide-reaching influence.

As was said in the discussion regarding popular feeling in Germany concerning syndicates, there has been during the past two or three years much complaint regarding the coal syndicate. Various chambers of commerce have thought best to make certain investigations of the subject through the holding of meetings at which manufacturers could express their opinion. Numerous articles in the periodicals and members of legislatures have likewise attacked the syndicate.

On the other hand, the syndicate has found not a few defenders. The technical periodicals, generally speaking, are on the side of the syndicate, and claim that, although prices have increased, the increase has been due to the very large demand for coal, and that they would normally have increased much more had not the syndicate found it advisable to hold them steady and, relatively speaking, low. As has been seen, the Prussian minister of commerce has not hesitated to speak openly in the Landtag on the subject, and to state that in his judgment the action of the coal syndicate had prevented an extraordinary rise with later a sudden fall of prices; and he seems to believe that to the syndicate is due the credit of preventing a crisis in the coal trade, with corresponding injury to the workingmen.

The managers of the coal syndicate themselves do not, of course, deny that prices have increased. They claim, however, that they might well have increased their prices much more than they have thought it wise to do. The demand has been so

great that it has been utterly impossible for them to meet it in full, although they have endeavored to see to it that orders were filled rapidly enough so that there should be no check in production along any line. In many cases when they have refused to fill in full orders received it has been because they have believed that the purchasers were endeavoring to buy for speculative purposes, with the intention of reselling part of their purchases at higher rates, or that they were intending to store up for future needs a much larger amount than was necessary. They claim for this slow delivery really great credit in keeping prices steady and as low as they have been, believing that under a competitive system prices would have been very much higher. The experience of the seventies and eighties seems to show that this claim of theirs is not without foundation.

Another reason for failure to supply consumers promptly is that at times for comparatively short periods there has been lack of transportation facilities. During the time of the delivery of sugar beets it has been difficult to secure as many cars as were necessary, and in one or two cases, owing to storms, the railroads have for several days at a time been unable to supply their needs for cars. In one or two instances, in consequence of this failure on the part of the railroads, some manufacturing establishments have been compelled to shut down for very brief periods from lack of coal, when their demands would have been met so far as the coal syndicate had anything to do with the matter.

They do not deny that they might have increased their output somewhat more rapidly than they have done, although there has been a decided increase in the output by opening new mines or extending gradually the capacity of their present mines. A more rapid increase, however, would have involved the investment of large additional sums in equipping the plant, which they did not think would be needed after the present extraordinary demand had passed, and which would in consequence be an unwise investment. Moreover, such action on their part would have led them to engage hundreds, possibly even several thousands, of additional workingmen, who, when the extraordinary demand had passed, would be thrown out of employment. Under conditions existing in Germany, with their relatively speaking low rates of wages, they feel that such action on their part would not be justified. Public opinion will not permit in Germany, so readily as in America, the discharge of large numbers of men on short notice. It is their claim, therefore, that their course of procedure has been not merely conservative, but decidedly in the interests of the public, and in the long run, since they thereby have averted a crisis in the coal trade, doubtless in their own interests also.

The following table gives the prices per ton of coal in one mine for a period of many years. It will be noted that in the seventies prices were very much higher than even at the present time, and that even in the early nineties for two or three years they were higher than now, but that during the existence of the coal syndicate, and especially during the last years, there has been a steady increase in price.

Selling price, per ton, of the Gelsenkirchener Bergwerks-Aktien-Gesellschaft (mining

corporation).

For many years in the past there has been a steady increase in the amount of coal that has been put upon the market, and it is not noticeable that there has been any check whatever in this increase, owing to the formation of the syndicate. The increase in price, therefore, can hardly be said to come from any absolute lessening of the production, even though there seems to be a coal famine, owing to the extraordinary increase in the demand.

The percentage of the entire amount mined and sold to the public by the syndicate has also steadily increased, a fact which seems to prove again that the syndicate as such has not restricted production for the sake of increasing prices more than have the independent producers.

They have also claimed that in some cases the very high prices were made by the dealers. An investigation made by a committee appointed by the United Rhenish

Westphalian Chamber of Commerce proves this in certain instances beyond question. To prevent the continuance of this abuse, the syndicate agreed with the committee to make a better classification of qualities and to control the dealers. If they ask too much the syndicate is to fine them 10 marks a ton, or even stop selling to them, in case of dispute the Chamber of Commerce of Essen to give a decision. In larger places, too, the syndicate has started branches to make sales direct, and it expects to extend this system.1

The larger part of the output of the coal syndicate has been for home consumption, but for several years it has steadily exported part of its product, some 15 to 16 per cent. This has been exported mainly in competition with English coal, and has in consequence had to meet English prices.

The iron syndicates also have been able to enter the foreign market in competition with England. Whenever they have had what has seemed to them a surplus of product at home they have in individual cases paid out of the syndicate funds a bounty to exporters. This, of course, as in the case of the coal industry, has in many cases been criticised by the consumers, but the iron manufacturers themselves claim that in order to keep their works running to their full capacity it has been necessary to export this surplus, and that on the whole the cost of production has been thereby so much lessened that home consumers have probably paid no more than would have been the case had these goods not been exported at lower prices.

THE TARIFF.

The tariff policy of Germany has been substantially the same as that of Austria. It has been the intention to levy a duty distinctly for purposes of protection, although the Government in passing the tariff laws seems generally to have endeavored to keep the rate low enough so that there could not be material abuses in the way of pushing prices too high on the part of the protected industries. The manufacturers, however, make no pretense of not making use of the tariff in fixing their prices. The policy was stated distinctly in an address before the iron miners of Upper Silesia in November, 1895, as follows: "We demand a moderate protection for German labor. Germany has been made heretofore, on account of our wide-open door for import, the dumping ground for the overproduction of foreign countries. It has been this flooding of Germany with the surplus of foreign lands that has depressed our prices and checked the course of development of our industries and the improvement of our industrial conditions. Let us, therefore, close our doors, raise higher barriers, and seek to preserve for German industry the German market in which at the present time German skill and courage is plundered by the foreigner." Through their protective tariff the Germans have expected, they say, to protect their industry from exploitation by the foreigner, and, on the other hand, by combinations of various kinds to protect it against the extreme competition at home which they believe to be no less destructive. They have claimed repeatedly that it is not wise to keep continually in mind the good of the consumer, but that while not losing sight of the consumer's welfare, the good of the producer must likewise not be forgotten. That their protective tariff has in protecting industry protected also the combinations they do not deny, but without hesitation in many cases they are ready to take the position that the combinations are worth protecting and that the only thing necessary is to prevent them from abusing their power.2

WAGE EARNERS.

Attention has already been called, in other connections, to the statements made by managers of syndicates that one of their chief purposes has been to secure so regular prices and such an adjustment of the output to the demand that labor might be kept profitably and steadily employed. There have been some syndicates organized, as has been mentioned before, for the purpose of enabling the employers to hold their own somewhat better in threatened struggles with their workingmen. Generally speaking, however, in Germany this has not been a cause for their organization. From their form it will be seen that with rare exceptions they can not close the different establishments, and that the syndicate managers, as such, have nothing whatever to do with the relations between the laborers and their employers. Speaking generally, it is not probable that there has been any material effect upon wages. In certain special instances the effect can probably be traced. While there was in

1 Berg und Huettenmännische Zeitung, Januar 11, 1901, p. 23.

2 Address by Dr. W. B. Beumer, from Stahl und Eisen, 1895, No. 22; Address of Herr Brefeld, Minister of Commerce and Industry, February 1, 1900; Report of the debates of the House of Representatives, pp. 842, 846, 856; Liefmann, Der Unternehmerverbände, p. 51.

the earlier days of the coal syndicate some hostility on the part of the workers and the belief that they were being exploited, the syndicate managers at the present time think that their course has, on the whole, been so conservative that they have convinced the leaders of the unions that the syndicate is in the interests not merely of the consumers, but also, in the long run, of the workingman as well, and it is thought that the leading labor men are not opposed to it. Information regarding the situation in other industries is not so readily available. The formation of syndicates in Germany, naturally, as elsewhere, has led, on the part of some of the Socialists, to the belief that a generally syndicated industry is but the forerunner of the socialistic state; but here, as elsewhere, the expression of this belief seems to have been limited to the Socialists, and to have made no material impression upon thinkers and writers generally.

THE LAW REGARDING COMBINATIONS.

In Germany the law, so far as it concerns combinations, seems to be more favorable than in any other of the prominent manufacturing countries. As we have seen, the common law in England and in the United States has been interpreted rather strictly on the subject of monopolies. In the United States the common law, as supplemented by our statutes, has even been interpreted to mean that restrictions in restraint of trade were to be considered illegal, even though they were not unreasonable.1

2

The English courts seem, on the whole, to have taken the position that restrictions in partial restraint of trade, particularly where the object has been rather to prevent ruinous competition and secure living rates than to maintain a monopoly, may be legal. In Germany the courts have gone even further. In a case decided in 1897,3 it was distinctly held that the ordinary form of contract made in the organization of a German combination, by which a manufacturer had agreed to sell his product exclusively through the joint selling agency under penalty of a fine, was legal and enforceable. The purpose of the combination had been stated to be to prevent in future ruinous competition among the members and to obtain an adequate price for their product. One court decided that the combination had no legal standing to bring the claim, but the higher courts held otherwise. The court says this: "When in a branch of industry the prices of a product fall too low, and the successful conduct of the industry is endangered or made impossible, the crisis setting in as the result of such a state of affairs is detrimental, not only to individuals, but also to society as a whole; and it is, therefore, in the interests of the community that improperly low prices should not exist in a certain branch of industry for a long time. The legislative bodies have often, and up to recent times, attempted to obtain higher prices for certain products by the introduction of protective tariffs. Therefore it can not be simply and generally considered as contrary to the interests of the community when entrepreneurs interested in a certain branch of industry unite with the object of preventing or moderating the mutual underselling, and, as a result of the latter, the fall of prices of their products. On the contrary, when prices are for a long time actually so low that financial ruin threatens the entrepreneurs, their combination appears to be not merely a legitimate means of self-preservation, but also a measure serving the interests of the community. The formation of syndicates and cartels of the kind here discussed is, also, on many sides thought to be a means particularly suited to render great service for the adequate progress of the whole economic life of society, in so far as it prevents uneconomical working at a loss, overproduction, and the catastrophes connected with it." And further as follows: "The regulation of the industrial law (according to which everybody is guaranteed the individual right to carry on any business to his liking, in so far as the law does not prescribe or allow exceptions and limitations) is not to be interpreted that no one can subject himself by a contract to any limitation as to where and how to carry on a business. That this is not the meaning of section 1 of the industrial law has been recognized by the imperial court in repeated decisions by affirmative answers to the question whether the so-called suppression of competition is consistent with law, adding that through such contracts the industrial freedom of the individual is to be restricted, but not taken away forever, wholly or in part."

From this decision, given in full in Appendix V, p. 197, and also from the later decision regarding the coal syndicate, translated in Appendix VI, it will be seen that in Germany the formation of syndicates for the purpose of keeping up prices and regulating production is favored by the courts as well as by the Government.

1 United States v. Addyston Pipe and Steel Company et al., 175 U. S., 211, and elsewhere.

2 Mogul Steamship Co. v. McGregor, Gow & Co., 1892, App. Cases, 25.

3 VI Civilsenat. Urt., v. 4, Februar, 1897, i. S. E. (Bekl.), w. den Sächsischen Holzstoff-FabrikantenVerband (XI), Rep. VI, 307–396.